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10 profitable ways to use the
Chapter 1 Introduction: “The Goal”
“I get the gut hunch that none of us here has anything more than a What is the goal of a company? Many suggestions have been put forward, including maximising profit, sales and/or market share. Particular industries may favour one over another, each “goal” requiring particular metrics to monitor progress. And because these measurements give a degree of certainty, many managers assume that they must be addressing the issues. The “Theory of Constraints” helps remove this veil of complacency, and brutally shows that most business decisions are not based on best practice, maximising shareholder value, or even just doing a good job. The decisions are more about conforming to historical requirements and “looking good”. In the 21st Century, this is a recipe for disaster. First published in 1984, “The Goal” is a business novel written by Eliyahu M. Goldratt and Jeff Cox. Set in the fictitious world of a failing U.S. manufacturer (UniCo) and its struggling branch plant division (UniWare), Goldratt uses the characters of Alex Rogo (the uninitiated) and Jonah (the one with the questions) to lead the reader through an alternative way of running an industrial company. The Real Company In carrying out the original research in 2000, I had access to a mid-sized financial services company (referred to as Warrender Financial) to test whether or not the concepts, methodology and outcomes held in the real world. As a workable solution, the “Theory of Constraints” should be transferable to a UK-based service company, as much as to a US-based manufacturer. Subsequent work elsewhere keeps throwing up the same behaviours and symptoms, so it appears that location, company or even industry is largely irrelevant to the value of the Theory. At the most simple level, a financial services company’s model is to take cash, invest it and return the cash plus growth at some indeterminate time down the line. Along the way, it provides various forms of intangible financial security and risk diversification. This model can apply to all businesses, whereby shareholders (private or public) invest diversely in the expectation of a profitable return in the future, and thus financial services should have the same sorts of issues - and solutions - as other industries. And this is the context for what follows. Okay, so you want to know more. The next chapter introduces the key concepts and terminology behind the Theory.
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